What percentage of a debt is typically accepted in a settlement?

The percentage of a debt typically accepted in a settlement is 30% to 80%. This percentage fluctuates due to several factors, including the debt holder’s financial situation and cash on hand, the age of the debt, and the creditor in question. The debt settlement company you decide to work with plays an important role, too.

For example, National Debt Relief has been able to settle debt for as low as 30% of the original balance, but could charge fees as high as 25% of that original balance. Additionally, while Donaldson Williams may reach a settlement as high as 60%, their fees are low at 17%. A few of the highest ranking debt settlement companies are listed in the table below.

Percentage of a Debt Typically Accepted in a Settlement:

The percentage of a debt accepted in a settlement depends on:

Your financial situation. In the process of negotiation, creditors will try to ascertain your financial situation and amount of cash on hand. Greater disposable income and available cash will generally lead to a lower percentage of forgiven debt. This makes sense; creditors want you to pay off as much debt as you can. It would be hard for you to make a case that your debt should be written off when you have the means to pay a decent portion of it.

How old the debt is. The older your debt is, the more likely it is that creditors will regard it as uncollectible. When they view debt as uncollectible, they’re more likely to accept a favorable settlement percentage. For them, getting some of the debt back is better than nothing. It’s important to note that while an older debt increases the likelihood of a favorable settlement outcome, it comes at the expense of your credit. You can read more about how debt settlement hurts your credit in our guide.

The creditor. During the debt settlement process, you will negotiate with either your original creditor or the collection agency assigned to your debt. If your account is over 180 days past due, you’re more likely to interact with a collection agency. Neither party has an obligation to settle debt, so whom you negotiate with plays an important role in the ultimate settlement percentage. It’s a good idea to do some research on the party handling your debt before beginning negotiations. You’ll learn more about their approach to debt settlement and others’ experience with them. The Better Business Bureau is a good resource for your research.

Bottom Line:

The typical percentage of debt accepted in a settlement depends on the debt settlement company you decide to work with (if any), your finances, amount of debt, and creditor. There’s nothing you can do to change your financial situation, but you can tailor your approach to the negotiations.

Before negotiations begin, use the credit card(s) in question only for essentials and attend a credit counseling session to learn about your options. This will show the creditor that you are acting in good faith and only pursuing debt settlement as a last resort. This will go a long way in improving your chances for a more favorable debt settlement.